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New Car Sales Expected to Rise Again in Europe This Year

Analysts warn auto sales are still “fragile” on the continent.

by on Jan.19, 2015

European auto sales are expected to rise again in 2015 with products like Opel's new Corsa available, but the market is still shaky.

Car sales in Europe are expected to grow in 2015 marking the second year in row the struggling market could post gains. However, one analyst is exercising caution regarding the increase claiming the market is still fragile.

IHS Automotive predicts sales could grow by 2.5% in 2015 after rising by 5.7% in 2014. Last year’s increase was the first in six years since the Great Recession sent the European car industry into a tailspin.

Power!

Registrations during the year rose to 12.55 million units. The sales trend in Europe has been steady monthly increases with December marking the 16th straight month of gains. Registrations grew 4.7% year-over-year to 951,329 units in December.

The outlook in Europe is crucial to companies such as General Motors Co., Ford Motor Co and Fiat Chrysler Automobiles, whose European units are unprofitable. Volkswagen, Toyota, Nissan Renault and Peugeot also all face similar challenges in the European market.

The improvement during the year was underpinned by the growth in many markets in the five key markers, Germany, France, Italy, Spain and the United Kingdom, according to IHS. But the scope of the gains has varied and remains susceptible to outside shocks.

Carlos Da Silva, manager for IHS Automotive’s European light-vehicle sales forecast, said the improvement is a “welcome relief” for the market, but the market remains fragile and is “not a fully cured patient.”

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He notes that part of the reason for the sales improvement is a need for new vehicles across the continent, but also he warns that incentives played a critical role in driving those sales increases last year.

“2014 should be taken with relief and satisfaction,” he said. “However, this growth should not be misinterpreted: the foundations for a flourishing car market are yet to be built. Right now, the patient is still limping, not starting to run on both legs!”

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The French market recorded a marginal improvement, despite emissions-related tax increases, a tough labor market and weak confidence. Greater confidence and continued deal-making in the United Kingdom lifted the market to its highest annual registration total since 2005.

However, the Spanish market has improved by a substantial 18.4% on a year-over-year basis thanks to the government-backed Industrial Plan for the Ecological Vehicle scrapping incentive, which was enabled to maintain momentum in the final months with an extension to the sixth round. Nevertheless, this improvement is from an exceptionally low ebb, as is the improvement in Italy.

The gain in registrations in 2014 has also benefited many of the OEMs in the EU this year. This included the market’s largest player, the Volkswagen (VW) Group, which has increased 7.2% to 3.18 million units, as it maintained a marketshare of more than 25%. It was helped by the four key brands under its umbrella, but the double-digit percentage gains recorded by both Skoda and SEAT are of particular note. Second largest was PSA Peugeot-Citroën, with a 3.7% gain to 1.36 million units, supported by new model launches at both its Peugeot and Citroën brands.

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The Renault Group’s improvement was even bigger, as its Renault brand, which has done well in some markets, grew 9.4% However, its low-cost Dacia brand’s range continues to win over new audiences and recorded an increase of 23.9% in doing so. Gains were recorded by the majority of other automakers as well, with the exception being GM.

While its core Opel and Vauxhall brands recorded an improvement of 7.7%, this was offset by a 73.9% slump for Chevrolet as part of GM’s moves towards withdrawing the brand from the region during 2016, according to IHS estimates.

The inconsistent nature of last year’s results is reflected in IHS Automotive’s forecast for 2015 which shows that registrations are expected to grow to nearly 12.9 million units. However, the market remains behind the pre-crisis average of around 15.2 million units, and is not expected to return to those levels until the end of the decade.

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